10-Q/A 1 d10qa.txt FORM 10-Q/A UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------------------------- FORM 10-Q/A QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2000 Commission file number 0-6094 ------- NATIONAL COMMERCE BANCORPORATION -------------------------------- (Exact name of registrant as specified in its charter) Tennessee 62-0784645 ---------- ---------- (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) One Commerce Square 38150 ----- Memphis, Tennessee (Zip Code) ------------------ (Address of principal executive offices) Registrant's telephone number including area code - (901)523-3434 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock, $2 par value -- 111,059,797 shares as of August 1, 2000 PART I. FINANCIAL INFORMATION ------------------------------ Item 1. Financial Statements -------------------- NATIONAL COMMERCE BANCORPORATION Consolidated Balance Sheets -------------------------------- (In Thousands)
June 30 Dec. 31 2000 1999 ---------- ---------- (unaudited) ASSETS ------ Cash and cash equivalents: Interest-bearing deposits with other banks $ 7,483 $ 21,156 Cash and non-interest bearing deposits 244,182 179,082 Federal funds sold and securities purchased under agreements to resell 34,550 61,058 ---------- ---------- Total cash and cash equivalents 286,215 261,296 ---------- ---------- Securities: Available-for-sale 656,163 553,928 Held-to-maturity 1,927,137 1,759,383 ---------- ---------- Total securities 2,583,300 2,313,311 ---------- ---------- Trading account securities 37,660 30,294 Loans, net of unearned discounts 4,266,056 3,985,789 Less allowance for loan losses 62,061 59,597 ---------- ---------- Net loans 4,203,995 3,926,192 ---------- ---------- Premises and equipment, net 51,163 47,830 Goodwill & core deposit intangibles 143,575 122,512 Broker/dealer customer receivables 26,274 25,047 Other assets 186,925 187,304 ---------- ---------- Total assets $7,519,107 $6,913,786 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Liabilities: Deposits: Non-interest bearing deposits $ 508,652 $ 454,146 Interest-bearing deposits 4,232,383 4,041,754 ---------- ---------- Total deposits 4,741,035 4,495,900 Short-term borrowings 1,175,662 883,038 Accounts payable and accrued liabilities 99,231 114,991 Federal Home Loan Bank advances 754,927 714,335 Long-term debt 6,379 6,372 ---------- ---------- Total liabilities 6,777,234 6,214,636 ---------- ---------- Capital trust pass-through securities 49,915 49,909 Stockholders' equity: Common stock 218,621 216,446 Additional paid-in capital 258,902 240,208 Retained earnings 221,869 196,755 Accumulated other comprehensive loss (7,434) (4,168) ---------- ---------- Total stockholders' equity 691,958 649,241 Total liabilities and --------- --------- stockholders' equity $7,519,107 $6,913,786 ========== ==========
See notes to consolidated financial statements. 2 NATIONAL COMMERCE BANCORPORATION Consolidated Statements of Income ---------------------------------- (Unaudited)(Restated) (In Thousands, Except per Share Data)
For the three months For the six months ended June 30 ended June 30 --------------------- ------------------- 2000 1999 2000 1999 -------- -------- -------- -------- Interest income: Loans $ 95,367 $ 69,183 $183,243 $136,467 Securities: Taxable 41,965 33,551 82,052 65,720 Non-taxable 1,686 2,890 3,401 5,865 Trading account securities 520 632 996 1,281 Deposits at bank 28 229 127 476 Other 2,826 1,111 4,995 1,905 -------- -------- -------- -------- Total interest income 142,392 107,596 274,814 211,714 -------- -------- -------- -------- Interest expense: Deposits 49,744 35,603 96,256 70,157 Federal Home Loan Bank advances 12,634 9,528 24,684 18,495 Long-term debt 92 91 184 181 Federal funds purchased and securities sold under agreements to repurchase and other short-term borrowings 17,427 8,034 29,794 15,947 -------- -------- -------- -------- Total interest expense 79,897 53,256 150,918 104,780 -------- -------- -------- -------- Net interest income 62,495 54,340 123,896 106,934 Provision for loan losses 3,865 3,835 6,042 6,214 -------- -------- -------- -------- Net interest income after provision for loan losses 58,630 50,505 117,854 100,720 -------- -------- -------- -------- Other income: Trust service income 2,362 2,152 4,712 4,217 Service charges on deposits 8,521 4,767 16,063 9,402 Other services charges and fees 5,837 5,108 10,849 9,822 Broker/dealer revenue 3,677 4,892 8,416 10,323 Securities gains (losses) 127 (2,034) 128 (2,033) Other 4,042 7,951 8,342 11,089 -------- -------- -------- -------- Total other income 24,566 22,836 48,510 42,820 -------- -------- -------- -------- Other expenses: Salaries and employee benefits 21,362 20,247 42,268 40,800 Occupancy expense 3,899 3,225 7,471 6,421 Furniture and equipment expense 1,874 1,722 3,640 3,287 Amortization of goodwill and core deposit intangibles 3,249 1,375 6,077 2,778 Loss from interest rate swaps 2,917 69 7,682 69 Other 14,760 12,169 28,799 22,448 -------- -------- -------- -------- Total other expenses 48,061 38,807 95,937 75,803 -------- -------- -------- -------- Income before income taxes 35,135 34,534 70,427 67,737 Income taxes 11,194 11,696 22,494 22,761 -------- -------- -------- -------- Net income $ 23,941 $ 22,838 $ 47,933 $ 44,976 ======== ======== ======== ======== Basic net income per share of common stock $ .22 $ .22 $ .44 $ .44 Diluted net income per share of common stock $ .22 $ .22 $ .43 $ .43 Dividends per share of common stock $ .105 $ .09 $ .21 $ .18
See notes to consolidated financial statements. 3 NATIONAL COMMERCE BANCORPORATION Consolidated Statements of Cash Flows ------------------------------------- (Unaudited)(Restated)
For the Six Months Ended June 30 ---------- ---------- 2000 1999 --------- --------- (In Thousands) Operating activities: Net income $ 47,933 $ 44,976 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Provision for loan losses 6,042 6,214 Provision for depreciation and amortization 9,365 8,530 Net loss (gain) on sales in investment securities (128) 2,033 Net loss (gain) on sales of interest rate swaps 7,682 (17) Deferred income taxes (4,443) 621 Changes in: Trading account securities (7,366) (19,929) Other assets (6,908) (70,503) Other liabilities (15,125) 99,811 Other operating activities - net (6,726) - --------- --------- Net cash provided by (used in) operating activities 30,326 71,736 --------- --------- Investing activities: Proceeds from: Maturities and calls of securities - 154,753 Sale of investment securities 34,068 62,828 Purchases of: Investment securities (278,497) (495,806) Premises and equipment (2,065) (6,867) Net origination of loans (173,281) (223,234) Net cash acquired in business combinations 3,427 - --------- --------- Net cash provided by (used in) investing activities (416,348) (508,326) --------- --------- Financing activities: Net increase in deposit accounts 135,319 149,065 Net increase (decrease) in short-term borrowed funds 292,624 116,320 Increase (decrease) in long-term debt 13 7 Increase (decrease) in Federal Home Loan Bank advances 19,398 42,039 Issuance of common stock from exercise of stock options 2,182 1,690 Stock offering - 80,248 Purchases and retirement of common stock (17,167) (9,977) Other equity transactions, net 1,406 687 Cash dividends paid (22,834) (18,567) --------- --------- Net cash provided by (used in) financing activities 410,941 361,512 --------- --------- Decrease in cash and cash equivalents 24,919 (75,078) Cash and cash equivalents at beginning of period 261,296 311,850 --------- --------- Cash and cash equivalents at end of period $ 286,215 $ 236,772 ========= =========
See notes to consolidated financial statements. 4 NATIONAL COMMERCE BANCORPORATION -------------------------------- Notes to Consolidated Financial Statements ------------------------------------------ June 30, 2000 ------------- (Unaudited) --------- Restatement ----------- As a result of technical violations of pooling of interest rules regarding treasury share repurchases and stock options, the Company is restating the presentation of 9 business combinations as purchases rather than as poolings of interests as previously reported. As a result of the foregoing, the Company's 1998, 1999, and 2000 consolidated financial statements have been restates. Management believes that the Company's consolidated financial statements, as restated, include all adjustments necessary for a fair presentation of the Company's financial position as of December 31, 1999 and June 30, 2000, and its results of operations for the three and six month periods ended June 30, 1999 and 2000. For the three and six month periods ended June 30, 2000, restated net income equals $23,941,000 and $47,933,000, or $.22 and $.43 diluted earnings per share versus originally reported net income of $27,731,000 and $54,206,000 or $.25 and $.49 diluted earnings per share. For the three and six month periods ended June 30, 1999, restated net income equals $22,838,000 and $44,976,000, or $.22 and $.43 diluted earnings per share, versus originally reported net income of $25,727,000 and $50,952,000, or $.23 and $.47 diluted earnings per share. Note A - Basis of Presentation ------------------------------ The consolidated balance sheet at December 31, 1999 has been derived from the audited financial statements at that date. The accompanying unaudited interim consolidated financial statements reflect all adjustments (consisting only of normally recurring accruals) which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. The statements should be read in conjunction with the summary of accounting policies and notes to consolidated financial statements included in the Registrant's annual report for the year ended December 31, 1999. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted in accordance with the rules of the Securities and Exchange Commission. During second quarter, 2000, the Company acquired Piedmont Bancorp. Inc., a $150 million asset size bank holding company headquartered in Hillsborough, North Carolina. This acquisition, which was accounted for using the purchase method of accounting for business combinations, is incorporated into reported results from the date of acquisition. Reported results do not include the results of CCB Financial Corporation, an $8 billion bank holding company, with whom the Company merged July 5, 2000, and the results of FMT Holdings, Inc. which the Company acquired by merger on July 27, 2000. These acquisitions are to be accounted for using the purchase method of accounting for business combinations. Note B - Segment Information ---------------------------- The Company considers itself to operate two principal lines: traditional banking and financial enterprises. The traditional banking segment includes sales and distribution of financial products and services to individuals. These products and services include loan products such as residential mortgages, home equity lending, automobile and other personal financing needs. Traditional banking also offers various deposit products that are designed for customers' saving and transaction needs. The traditional banking segment also includes lending and related financial services provided to large and medium-sized corporations. Included among these services are several specialty services such as real estate finance, asset based lending and residential construction lending. Traditional banking also includes management of the investment portfolio and non-deposit based funding. The Financial Enterprises segment includes trust services and investment management, transaction processing, in-store consulting/licensing and institutional broker/dealer activities. The accounting policies of the individual segments are the same as those of the Company described in Note A. Transactions between business segments are conducted at fair value and are eliminated for reporting consolidated financial position and results of operations. Interest income for tax- exempt loans and securities is adjusted to a taxable equivalent basis. 5 The following tables (in thousands of dollars) present condensed income statements on a fully taxable equivalent basis and average assets for each reportable segment.
Quarter Ended June 30, 2000: Traditional Financial Banking Enterprises Total ----------- ------------ ----------- Net interest income $ 63,520 $ 3,311 $ 66,831 Provision for loan losses (3,865) - (3,865) ---------- -------- ---------- Net interest income after provision 59,655 3,311 62,966 Non-interest income 11,775 12,791 24,566 Non-interest expense (38,670) (9,391) (48,061) ---------- -------- ---------- Net income before taxes 32,760 6,711 39,471 Income taxes (12,834) (2,696) (15,530) ---------- -------- ---------- Net income $ 19,926 $ 4,015 $ 23,941 ========== ======== ========== Average assets $7,146,029 $423,017 $7,569,046 Quarter Ended June 30, 1999: Traditional Financial Banking Enterprises Total ----------- ------------ ----------- Net interest income $ 55,061 $ 2,503 $ 57,564 Provision for loan losses (3,835) - (3,835) ---------- -------- ---------- Net interest income after provision 51,226 2,503 53,729 Non-interest income 10,353 12,483 22,836 Non-interest expense (29,977) (8,830) (38,807) ---------- -------- ---------- Net income before taxes 31,602 6,156 37,758 Income taxes (12,359) (2,561) (14,920) ---------- -------- ---------- Net income $ 19,243 $ 3,595 $ 22,838 ========== ======== ========== Average assets $5,764,879 $354,426 $6,119,304 Six Months Ended June 30, 2000: Traditional Financial Banking Enterprises Total ----------- ------------ ----------- Net interest income $ 126,640 $ 5,867 $ 132,507 Provision for loan losses (6,042) - (6,042) ---------- -------- ---------- Net interest income after provision 120,598 5,867 126,465 Non-interest income 21,269 27,241 48,510 Non-interest expense (76,756) (19,181) (95,937) ---------- -------- ---------- Net income before taxes 65,111 13,927 79,038 Income taxes (25,595) (5,510) (31,105) ---------- -------- ---------- Net income $ 39,516 $ 8,417 $ 47,933 ========== ======== ========== Average assets $7,120,882 $398,225 $7,519,107 Six Months Ended June 30, 1999: Traditional Financial Banking Enterprises Total ----------- ------------ ----------- Net interest income $ 108,276 $ 5,130 $ 113,406 Provision for loan losses (6,214) - (6,214) ---------- -------- ---------- Net interest income after provision 102,062 5,130 107,192 Non-interest income 17,689 25,131 42,820 Non-interest expense (57,871) (17,932) (75,803) ---------- -------- ---------- Net income before taxes 61,880 12,329 74,209 Income taxes (24,071) (5,162) (29,233) ---------- -------- ---------- Net income $ 37,809 $ 7,167 $ 44,976 ========== ======== ========== Average assets $5,650,874 $372,649 $6,023,523
6 Note C - Earnings Per Share --------------------------- The following table sets forth the computation of basic and diluted earnings per share:
Three Months Ended Six Months Ended June 30 June 30 -------- -------- In Thousands, Except Per Share Data 2000 1999 2000 1999 ---- ---- ---- ---- Numerator: Net income $ 23,941 $ 22,838 $ 47,933 $ 44,976 ======== ======== ======== ======== Denominator: Denominator for basic earnings per share - weighted average shares 109,425 102,878 108,851 102,140 Dilutive potential common shares - Employee stock options 1,726 2,166 1,593 2,099 -------- -------- -------- -------- Denominator for diluted earnings per share - adjusted weighted average and assumed conversions 111,151 105,044 110,444 104,239 ======== ======== ======== ======== Basic earnings per share $ .22 $ .22 $ .44 $ .44 Diluted earnings per share $ .22 $ .22 $ .43 $ .43
Note D - Comprehensive Income ----------------------------- During the second quarter of 2000 and 1999, total comprehensive income amounted to $23,078,000 and $22,718,000 respectively. The year-to-date total comprehensive income for 2000 and 1999 was $44,667,000 and $43,428,000 respectively. 7 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ----------------------------------------------------------------------- The purpose of this discussion is to focus on important factors affecting the Company's financial condition and results of operations. Reference should be made to the consolidated financial statements (including the notes thereto) set forth in this report for an understanding of the following discussion and analysis. In this discussion, net interest income and net interest margin are presented on a fully taxable equivalent basis. The Company acquired Piedmont Bancorp, Inc. of Hillsborough, North Carolina. This acquisition, which was accounted for using the purchase method of accounting for business combinations, is included in reported results from the date of acquisition. All per share data is adjusted to reflect all stock dividends and stock splits declared. On July 5, 2000, the Company merged with CCB Financial Corporation, with the Company as the surviving entity. Because the merger occurred after June 30, 2000, the historical financial statements included in this report do not give effect to the merger, nor does this discussion give effect to the merger. The Private Securities Litigation Reform Act of 1995 (the "Act") provides a safe harbor for forward-looking statements made by or on behalf of the Company. All statements in this Quarterly Report on Form 10-Q that are not historical facts or that express expectations or projections with respect to future matters are "forward-looking statements" for the purpose of the safe harbor provided by the Act. The Company cautions readers that such "forward-looking statements," including, without limitation, those relating to future business initiatives and prospects, revenues, working capital, liquidity, capital needs, interest costs and income, and "Year 2000" remediation efforts, wherever they occur in this document or in other statements attributable to the Company, are necessarily estimates reflecting the best judgment of the Company's senior management. Such statements involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the "forward-looking statements." Such "forward-looking statements" should, therefore be considered in light of various important factors, including those set forth in this document. Important factors currently known to management that could cause actual results to differ materially from those in forward-looking statements include significant fluctuations in interest rates, inflation, economic recession, significant changes in the federal and state legal and regulatory environment, significant underperformance in the Company's portfolio of outstanding loans, and competition in the Company's markets. Other factors set forth from time to time in the Company's reports and registration statements filed with the Securities and Exchange Commission should also be considered. The Company undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time. Financial Condition ------------------- Following is a comparison of the June 30, 2000 and December 31, 1999 consolidated balance sheets. In the asset section, total loans, net of unearned discounts, increased by $280 million or 7.0% compared to December 31, 1999 levels. Commercial loans increased by $14 million or 2%, real estate construction loans increased by $19 million or 7%, and real estate mortgage loans increased by $245 million or 15% reflecting current demand. Consumer loans increased $1 million or less than 1%. Securities increased by $270 million or 11.7% from year-end 1999. Securities held to maturity increased by $168 million or 10%, and securities available for sale increased by $102 million or 18%, reflecting current portfolio investment strategies, and current market condition. Federal funds sold and securities purchased under agreements to resell decreased by $27 million or 43.4% from December 31, 1999 levels, reflecting levels of activity of correspondent banks at June 30, 2000. Trading account securities increased by $7 million or 24.3% from year-end 1999 levels. This decrease reflects the trading activity generated by NBC Capital Markets Group, Inc., the Company's broker/dealer subsidiary, which fluctuates from time to time. Broker/dealer customer receivables increased $1.2 million or 4.9%. In the liability section, total deposits increased by $245 million or 5.5%, 8 principally as a result of a $208 million or 15.6% increase in certificates of deposit greater than $100,000, a $102 million or 10.3% increase in certificates of deposit less than $100,000 and a $55 million or 12.0% increase in non- interest-bearing deposits. This increase was partially offset by a $120 million or 7% decrease in savings, NOW and money market accounts. Short-term borrowings increased $292 million or 33.1% from year-end 1999 levels. This category of liabilities fluctuates with the availability of overnight funds purchased from downstream correspondent banks. Federal Home Loan Bank advances increased $41 million or 5.7% from December 31, 1999. This increase is principally the result of asset/liability management decisions related to the current interest rate environment. Results of Operations --------------------- Three Months Ended June 30, 2000, Compared to Three Months Ended June 30, 1999 ------------------------------------------------------------------------------ Net income was $23,941,000 for the second quarter of 2000, a 4.8% increase over the $22,838,000 reported for the same period a year earlier. Diluted earnings per share were $.22 compared to $.22 per share in 1999. Basic earnings per share were $.22 compared to $.22 per share in 1999. Net interest income, the difference between interest earned on loans and investments and interest paid on interest-bearing liabilities, increased by $9,267,000 or 16.1% for the second quarter of 2000, compared to second quarter 1999. This increase reflects a $35,908,000 or 32.4% increase in total interest income that more than offsets a $26,641,000 or 50.0% increase in interest expense. Interest income increased in 2000 due to an increase of $1,356,000,000 or 23.9% in total average earning assets, and an increase in the yield on average earning assets from 7.83% in the second quarter of 1999 to 8.37% in the second quarter of 2000. The increased volume of earning assets increased interest income by approximately $26,458,000 while the increased yield reduced interest income by approximately $9,450,000. Interest expense increased in the second quarter of 2000, reflecting an increase in average interest-bearing liabilities of $1,240,000,000 or 24.8% and an increase in the cost of interest- bearing liabilities from 4.27% to 5.14%. The increase in the rate paid on interest-bearing liabilities decreased interest expense by approximately $13,432,000 and the increase in average outstandings increased interest expense by approximately $13,209,000. The net interest margin (taxable equivalent net interest income as a percentage of average earning assets) was 3.81% in second quarter 2000, compared to 4.07% in second quarter of 1999. The provision for loan losses in the second quarter of 2000 was $3,865,000, versus $3,835,000 for the second quarter of 1999. Net charge-offs were $2,023,000, or .19% of average net loans, compared to $1,999,000 or .23% of average net loans in 1999. The allowance for loan losses totaled $62,061,000 at June 30, 2000, representing 1.45% of quarter-end net loans, compared to $59,090,000 or 1.47% of quarter-end net loans at March 31, 2000. Following is a comparison of non-earning assets and loans past due 90 days or more for the quarters ended June 30, 2000, March 31, 2000, and June 30, 1999 (dollars in thousands):
6-30-00 3-31-00 6-30-99 -------- -------- -------- Non-accrual loans $ 1,377 $ 1,207 $ 1,601 Renegotiated loans 0 0 0 Other real estate 1,309 220 1,200 -------- -------- -------- Total non-earning assets $ 2,686 $ 1,427 $ 2,801 ======== ======== ======== Loans past due 90 days or more $ 6,142 $ 5,037 $ 4,397 Percentage of total loans .14% .12% .12%
9 Non-interest income, excluding securities transactions, totaled $24,839,000 for the quarter, a decrease of $431,000, or 1.7%, from last year's second quarter. Securities gains totaled $127,000 in second quarter, 2000, compared to losses of $2,034,000 in 1999. Non-interest expenses (excluding the provision for loan losses) increased by $9,254,000 or 23.8.% in second quarter, 2000. The Company's return on average assets and return on average equity were 1.27% and 14.22% respectively, for second quarter of 2000. These compared with 1999 second quarter returns of 1.49% and 18.65%, respectively. Six Months Ended June 30, 2000, Compared to Six Months Ended June 30, 1999 -------------------------------------------------------------------------- For the six months ended June 30, 2000, net income totaled $47,933,000, a 6.6% increase over the $44,976,000 for the first six months of 1999. Basic earnings per share were $.44, compared to $.43 for the same period in 1999, a 2.3% increase. Diluted earnings per share were $.43 compared to $.43 in 1999. For the six-month period, return on average assets and return on average stockholders' equity were 1.30% and 14.51% respectively. These compared with 1999 six month returns of 1.49% and 18.96%. Net interest income increased by $19,102,000 or 16.8% for the first six months of 1999. This increase reflects a $65,240,000 or 29.9% increase in total interest income that more than offsets a $46,138,000 or 44.0% increase in interest expense. Interest income increased in 2000 due to an increase of $1,285,000,000 or 23.0% in total average earning assets and an increase in the yield on average earning assets from 7.87% in 1999 to 8.27% in 2000. The increased volume of earning assets increased interest income by approximately $50,135,000, and the increased yield increased interest income by approximately $15,105,000. Interest expense increased in the first six months of 2000, reflecting an increase in average interest-bearing liabilities of $1,167,000,000 or 23.7%, with the cost of interest-bearing liabilities increasing from 4.29% to 4.98% in 2000. The increase in average outstandings increased interest expense by approximately $24,806,000 while the increased rate increased interest expense by approximately $21,332,000. The net interest margin was 3.86% in the first six months of 2000, compared to 4.09% in the first six months of 1999. The provision for loan losses for the first six months of 2000 was $6,042,000, versus $6,214,000 for the first six months of 1999. Net charge-offs were $4,708,000, or .20% of average net loans compared to $4,022,000, or .25% of average net loans in 1999. Non-interest income, excluding securities transactions, totaled $48,382,000 for the first six months of 2000, compared to a total of $44,853,000 for the first six months of 1999, an increase of 7.9%. Included in 1999 is a $4,090,000 pre-tax gain from the sale of branches. Adjusting for this gain, non-interest income decreased 18.7% from 1999. Securities gains totaled $128,000 in 2000, versus losses of $2,033,000 in 1999. Non-interest expenses (excluding the provision for loan losses) increased by $20,134,000 or 26.6% for the first six months of 2000. Increased employment and occupancy expenses relating to new products and locations, and increased promotional expenses of new loan and deposit gathering campaigns were the primary reasons for the increase. Liquidity and Capital Resources ------------------------------- Interest-bearing bank balances, federal funds sold, trading account securities, and securities available for sale are the principal sources of short-term asset liquidity. Other sources of short-term liquidity include federal funds purchased and repurchase agreements, credit lines with other banks, and borrowings from the Federal Reserve Bank and the Federal Home Loan Bank. Maturing loans and securities are the principal sources of long-term asset liquidity. Total stockholders' equity increased by $45,983,000 from December 31, 1999. Retained earnings accounted for the majority of the increase. Through June 30, 2000, 9.3 million shares had been repurchased and cancelled under a stock repurchase program initiated in January, 1996, extended in December, 1997 and December, 1999. The following capital ratios do not include the effect of FAS No. 115 or FAS No. 10 133 on Tier I capital, total capital, or total risk-weighted assets. As indicated in the following table, the Company and its banking subsidiaries exceeded all minimum required capital ratios for well-capitalized institutions at June 30, 2000. 6-30-00 ------- Total capital to risk-weighted assets 12.52% Tier I capital to risk-weighted assets 11.27% Tier I capital to assets (leverage ratio) 8.22% Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ---------------------------------------------------------- No significant changes since December 31, 1999. See Item 2 - "Management's Discussion and Analysis of Financial Condition and Results of Operations." 11 PART II. OTHER INFORMATION --------------------------- Item 4. Submission of Matters to a Vote of Security Holders --------------------------------------------------- At the Company's Annual Meeting of Shareholders held April 26, 2000, the following proposals were approved by the shareholders of the Company: The following individuals were elected to serve as directors of the Company for terms that expire at the Annual Meeting of Shareholders to held in 2003: John D. Canale III; R. Lee Jenkins; W. Neely Mallory, Jr.; James E. McGehee, Jr.; William R. Reed, Jr.; and G. Mark Thompson. (81,405,586 shares in favor of the slate of directors; 500,077 withheld; and 8,581,473 exceptions.) The appointment of Ernst & Young LLP as auditors of the Company for 2000 was ratified. (90,105,967 shares in favor; 285,615 against; and 95,454 abstained). The proposal to increase by 4,000,000 shares the total number of shares of the Company's Common Stock for which options to purchase may be granted pursuant to the Company's 1994 Stock Plan as Amended and Restated was approved. (80,802,883 shares in favor; 9,407,330 against; and 276,823 abstained). At the Company's Special Shareholders Meeting held June 29, 2000, the following proposals were approved by the shareholders of the Company: The Agreement and Plan of Merger dated as of March 17, 2000 by an between CCB Financial Corporation and the Company and the amendment to the company's charter to increase the number of authorized shares of the company's common stock from 175,000,000 to 400,000,000 were approved. (74,791,705 shares in favor; 896.062 shares against; and 367,961 shares abstained). The proposal to amend the 1994 Stock Plan to increase the limitation on the number of shares of the Company's common stock for which options may be granted to an employee in any given year from 60,000 to 200,000, and in the case of the Company's Chairman and Chief Executive Officer from 100,000 to 400,000 was approved (62,118,972 shares in favor; 13,425,616 against; and 511,140 abstained). Item 6. Exhibits and Reports on Form 8-K -------------------------------- a. Exhibits 3.1 Charter of National Commerce Bancorporation as amended and restated filed as Exhibit 3.1 to the Registrant's Form 8-K dated July 11, 2000 (File No. 0-6094) and incorporated herein by reference. 10.21 Amendment to National Commerce Bancorporation 1994 Stock Plan 10.22 Employment Agreement entered into as of March 17, 2000, effective as of July 5, 2000, by and among National Bank of Commerce, National Commerce Bancorporation and Thomas M. Garrott 10.23 Employment Agreement entered into as of March 17, 2000, effective as of July 5, 2000, by and between National Commerce Bancorporation and Ernest C. Roessler 10.24 Employment Agreement entered into as of March 17, 2000, effective as of July 5, 2000, by and between National Commerce Bancorporation and William R. Reed, Jr. 10.25 Employment Agreement entered into as of March 17, 2000, effective as of July 5, 2000, by and between National Commerce Bancorporation and Richard L. Furr 10.26 Employment Agreement entered into as of March 17, 2000, effective as of July 5, 2000, by and between National Commerce Bancorporation and Lewis E. Holland 10.27 Employment Agreement entered into as of March 17, 2000, effective as of July 5, 2000, by and between National Commerce Bancorporation and J. Scott Edwards 10.28 Employment Agreement entered into as of March 17, 2000, effective as of July 5, 2000, by and between National Commerce Bancorporation and Sheldon M. Fox 12 10.29 Employment Agreement entered into as of March 17, 2000, effective as of July 5, 2000, by and between National Commerce Bancorporation and David T. Popwell 10.30 Employment Agreement entered into as of March 17, 2000, effective as of July 5, 2000, by and between National Commerce Bancorporation and Tom W. Scott 10.31 Change of Control Agreement dated as of July 5, 2000, effective upon a Change of Control, by and between National Commerce Bancorporation and Ernest C. Roessler 10.32 Change of Control Agreement dated as of July 5, 2000, effective upon a Change of Control, by and between National Commerce Bancorporation and William R. Reed, Jr. 10.33 Change of Control Agreement dated as of July 5, 2000, effective upon a Change of Control, by and between National Commerce Bancorporation and Richard L. Furr 10.34 Change of Control Agreement dated as of July 5, 2000, effective upon a Change of Control, by and between National Commerce Bancorporation and 10.35 Change of Control Agreement dated as of July 5, 2000, effective upon a Change of Control, by and between National Commerce Bancorporation and J. Scott Edwards 10.36 Change of Control Agreement dated as of July 5, 2000, effective upon a Change of Control, by and between National Commerce Bancorporation and Sheldon M. Fox 10.37 Change of Control Agreement dated as of July 5, 2000, effective upon a Change of Control, by and between National Commerce Bancorporation and David T. Popwell 10.38 Change of Control Agreement dated as of July 5, 2000, effective upon a Change of Control, by and between National Commerce Bancorporation and Tom W. Scott 27. Financial Data Schedule b. Reports on Form 8-K A current report on Form 8-K dated June 20, 2000 was filed under Item 5 - Other Events discussing the approval of the merger with CCB Financial Corporation by The Board of Governors of the Federal Reserve System. A current report on Form 8-K dated July 5, 2000 was filed under Item 5 - Other Events report the consummation of the CCB merger. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. NATIONAL COMMERCE BANCORPORATION (Registrant) By /s/ Mark A. Wendel -------------------------------------- Mark A. Wendel Senior Vice President and Chief Accounting Officer (Authorized Officer) (Chief Financial Officer) Date: September 11, 2001 ------------------ 13